Shopko Workers Are Latest Demanding PE Firms Pay Up After Retailer Fails

(Bloomberg) -- Employees of bankrupt department-store chain Shopko Stores Inc. are demanding the company’s private equity sponsor provide severance to workers impacted by its liquidation, according to a statement released Friday.

Shopko employees -- organizing through the labor non-profit United for Respect -- released an open letter to Sun Capital Partners Inc. executives Marc Leder and Rodger Krouse on Friday to make their appeal.

“Many of us have been left jobless and struggling to survive without severance for our years of service, and we are writing to you to demand accountability for Sun Capital’s actions,” read the letter, which asked that executives set up a fund for employees affected by the closures of the chain’s 350-plus stores.

A Sun Capital spokesman declined to comment.

The move builds on the success of former Toys “R” Us workers, who successfully lobbied two of the chain’s private equity owners, Bain Capital and KKR & Co., to create a $20 million hardship fund. Workers are increasingly speaking out to demand consideration during the bankruptcy process, buoyed by support from politicians, including some presidential hopefuls, in addition to the success of their peers.

‘Sickens Me’

“Many of us were promised severance packages when we found out our stores were closing, and then after we stayed till the end and went through the grueling liquidation process, were told that we would not be receiving severance after all,” the letter read.

Sun Capital acquired Shopko in a leveraged buyout in 2005, and the following year engineered a sale-leaseback transaction with Shopko’s real estate, which generated a short-term windfall while adding to long-term liabilities. Some revenue from those transactions went straight to the company’s private equity owners: a committee appointed in the bankruptcy identified almost $180 million in dividends paid to the sponsor between 2007 and 2015.

Unlike many other retailers that have liquidated, Shopko stores were concentrated in smaller communities with scant competition, leaving laid off workers with fewer options.

Tara Larson, 48, manages the store in Roseau, Minnesota that’s slated to close June 18. “It’s a very, very small community where it’s only manufacturing or farming,” she said in an interview.

Her store was profitable, she said, and among the last to close. Larson said workers at her location were told in March they’d be getting severance information soon. A month later, they learned they weren’t getting any. And unlike stores that closed in earlier rounds, workers at her store outside of a handful of managers received no retention bonus.

“It sickens me,” she said. “My thank you to me and my team for working hard was nothing at the end.”

Shopko filed for bankruptcy in January, and on Friday received court approval of a plan that will allow it to exit Chapter 11 and finalize the wind down of its operations.

To contact the reporters on this story: Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net;Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Boris Korby, Dawn McCarty

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